Canadian budget axes the penny
By Julie King | March 30, 2012
Hold onto your pennies!
The Government of Canada announced yesterday that it will no longer mint this expensive coin, although Canada's smallest currency denomination is not going away entirely.
When there are no pennies available for cash transactions, businesses will be required to round the transaction amount to the nearest 5 cent increment. Rounding is only done on the final sale amount after the GST/HST is calculated, not the cost of each item.
Rounding guidelines will not be set by the government, but businesses are expected to round prices in a fair and consistent manner.
Consumers who keep their pennies will be able to use them indefinitely; if a consumer has exact change, the business will not be allowed to round the final amount.
Transactions done online or by cheque will continue to use the penny, so this change will only impact cash transactions. Meanwhile businesses will still be able to redeem pennies at the bank.
The government has said that businesses will not need to update their cash registers for rounding, as prices and the final total payment will still be set at one-cent increments.
When rounding begins, the federal government plans to round down transactions with one, two, six or seven cent values and round up transactions with three, four, eight and nine cent valued.
For example, a final amount of either $2.37 will be rounded down to $2.35 while an amount of $2.38 would be rounded up to $2.40. Similarly, a tranaction of $6.82 would be rounded down to $6.80 while a transaction of $6.83 would be rounded up to $6.85.
- It costs 1.6 cents to produce a 1 cent penny.
- Many other countries, incluing Australia, Norway, Switzerland and the United Kingdom have successfully removed their "lowest denomination coin".
- Royal Canadian Mint will stop distributing pennies in the fall of 2012.
- The decision to stop minting the penny will save the government approximately $11 million a year.
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